Dalian Iron ore futures have failed for a third day to break the high RMB 775 high that formed on the 01/06/20, bringing a halt to the previous 4-day rally after repeated warnings from financial institutions that the current supply tightness will ease in the later months of the year.
Vale intend to fulfil their commitment to hit targets by year end, putting the futures on the same path as last year. Tightness in 2019 was followed by increased supply, and a strong sell off.
Market bulls know there is some potential for some upside on the back of an expanding PMI, but are unlikely to fall into the same trap as last year and push prices above the RMB 900 level when inventories sit at 110 million tons.
Buoyant Capes?
Stalling iron ore prices on an expanding Chinese economy spells good news for cape owners, who have had a torrid 2020 so far. Ton miles is a key factor to freight prices, but as seen previously in 2019, fleet displacement when supply does come back online has the potential to create a price and volatility expansion
(FIS)